Quake impact on cement limited

RECONSTRUCTION:：The demand for cement is expected to be smaller compared with the Wenchuan quake because of limited damage, producers and analysts said

By Camaron Kao / Staff reporter

Thu, Apr 25, 2013 - Page 14

Two Taiwanese cement companies yesterday said that reconstruction after last week’s earthquake in China’s Sichuan Province may boost cement demand, but it was still too early to gauge its potential impact on sales.

The companies’ cautious tone came as analysts said that market reaction to an anticipated pickup in cement demand might be overdone, given the limited physical damage from the magnitude 6.6 earthquake in Yaan City.

Asia Cement Co (亞泥), Taiwan’s second-largest cement maker, might not be able to supply cement for reconstruction work because its Chinese factory is 100km away from Yaan, company vice president Chou Wei-kuen (周維崑) said.

However, the Chinese factory, with an annual capacity of 6 million tonnes, might benefit from higher cement demand in the longer term because of the reconstruction work, Chou said.

“It is likely to take three months to half a year to draft the reconstruction plans and to calculate demand generated from the earthquake,” Chou said by telephone, adding that higher cement demand due to reconstruction could last for one to two years.

Taiwan Cement Corp (台灣水泥), the nation’s biggest cement maker, has a 30 percent-owned factory within 50km of Yaan, with an annual capacity of 1 million tonnes.

However, Taiwan Cement said that reconstruction demand for cement might not be high because the damage caused by the Yaan earthquake was smaller than the Wenchuan quake five years ago, deputy spokesman Robert Chen (陳旭川) said by telephone.

The two companies did not provide sales forecasts from potential reconstruction demand.

DBS Vickers Securities in Hong Kong said the Yaan quake would have little impact on the economy, compared with the Wenchuan earthquake in 2008 and the Yushu quake in 2010.

“Reconstruction budgets should be low” compared with the Wenchuan quake (1 trillion yuan, US$161.8 billion) or even the Yushu quake (32 billion yuan), DBS analyst Herbert Hui (許浩明) said in a note on Tuesday.

Deutsche Bank estimated that potential reconstruction for the Yaan quake would cost about 30 billion yuan, given that the negative impact from the quake would be much lower than that of the Wenchuan quake, which incurred a total direct economic loss of 845 billion yuan, and of the Yushu quake, which had a direct economic loss of 26 billion yuan.

The bank added it did not think the reconstruction in Yaan would significantly benefit the cement industry, given the oversupply in Sichuan.

The reconstruction is expected to create less demand than the 50 million tonnes generated by the Wenchuan reconstruction, Deutsche Bank said in a note on Sunday.